Should homesellers shun requests for pre-inspections?

Now that homesellers are back in the driver’s seat, pre-inspections are re-emerging as a tactic for strengthening a buyer’s offer. This time around, however, some homeowners are refusing to allow them.

What is a pre-inspection? It’s a general structural inspection of a home (usually by a professional home inspector) that takes place before the seller has accepted an offer.  This generally only happens in multi-offer situations, but those, too, are becoming commonplace again as a result of low inventory.

Since nearly every offer these days is conditioned upon the results of a structural inspection, real estate brokers will sometimes suggest that their clients invest in a pre-inspection as a way of making their offer more attractive to the homeowner.

Few homeowners pay for an inspection of their property before putting it on the market, so they can be justifiably nervous about hearing the results of an inspection performed by a professional hired by a buyer. Having already negotiated a purchase price, the inspection results often trigger another round of negotiations involving requests for repairs which will further reduce the net proceeds to the seller. To eliminate this concern for the seller, a buyer can pay for a pre-inspection and then submit an offer for a purchase price that will not (theoretically) be further reduced because they already know the condition of the house.

This strategy was common practice a few short years ago when Seattle last experienced a  seller’s market. Like the song says, “Everything old is new again.”

This time around, however, some sellers are saying “No” to pre-inspections. Why? Mostly because it is a major inconvenience for owners to open their home to strangers multiple times for several hours at a time (inspections usually take 2-3 hours). Occasionally, some minor damage can result from the inspector’s poking and prodding as well.

One alternative to allowing pre-inspections is for the seller to pay for an inspection (an average of $400) and then make the results available to all buyers who write an offer. Most buyers, however, will not be satisfied to accept the results of an inspection performed by someone who has been hired by the seller.

It’s worth mentioning that a buyer who pays for a pre-inspection and then either decides against making an offer or submits an offer that is not accepted by the seller, is out the $400. That can get pretty costly if you are a buyer making offers on several multi-offer properties.

What’s a buyer to do?

Are you a frustrated buyer? This is a great place to vent.

Bye-Bye Buyers’ Market

Is it still a buyers’ market? Not so much.

Sometimes the local real estate market changes so quickly it can make your head spin! Now is one of those times.

You may think I’ve been sounding like a broken record the last 6 months or so, telling you that our biggest problem in West Seattle real estate is a lack of inventory. I wasn’t kidding, and it’s still true.

In January of 2012 there were 352 Active listings in West Seattle and 84 homes sold. In January of this year, there were 184 Active listings and 98 sold.  That translates into 24% sold in 2012 vs. 53% in 2013! That doesn’t leave much inventory to choose from. Try as you might, there is no way around the law of supply and demand. It will always be true that when supply is low and demand is high, prices will go up. How much and how quickly they will go up is difficult to predict. Until recently (just the past month), buyers were being fairly conservative, refusing to repeat the feeding frenzy of just a few years ago, so price increases have been moderate. Brokers often heard their buyers say, “We won’t be part of a bidding war.” Believe me, brokers don’t like to participate in bidding wars any more than buyers do; everyone emerges with a bad taste in their mouth.

For better or for worse, however, buyers have taken off their gloves and gone back to offering well over the asking price, paying for pre-inspections and anything else they can think of to give themselves an advantage over competitors’ offers. In the past 4-6 weeks, multiple offers on new (and some old) listings have become the norm again. The only saving grace for buyers is that interest rates remain low, which helps keep mortgage payments more manageable.

The good news for homeowners is that you are regaining some of the equity you lost during the downturn. And, of course, if you decide to sell now/soon, you stand a much better chance of getting a reasonable price for your home. Keep in mind, however, that appraisals can be a stumbling block to financing. E.g. a house that goes on the market listed at $300,000 might get bid up to $350,000 but if the bank’s appraiser can’t find other comparable sales to justify that price, the buyers won’t be able to obtain financing and the whole deal will fall apart. This is a very real danger since appraisers are under a much more watchful eye now than they were before the downturn.

Wondering how much your house is worth today? Call me for a free market analysis.

Know some buyers who have been waiting to buy? You might want to give them a nudge. The bottom of the market is waaaaaay behind us.

(Reprinted from my monthly newsletter. Statistics are from the Northwest Multiple Listing Service.)